Option premium yield calculator: the period, the year, and the one trade that erases it
Premium divided by the cash it ties up — that's the yield. Stretching it to a year is only arithmetic, and the page shows the single bad trade that takes it all back.
How it works: yield for the period = premium ÷ collateral, where the collateral is the cash a put ties up (the strike) or what the shares cost you (a covered call). The yearly figure is the same number × 365 ÷ days to expiry — plain stretching, which assumes you could repeat the exact trade all year with no loss in between. Nothing like that is promised by the market. The losing case shows what one assignment does: the stock ends the chosen percentage under the strike, so the shares are worth that much less than you paid, minus the premium. Fees left out. An illustration of the math on your inputs, not a trade idea.
Why the yearly number lies if you let it
Stretching one month to twelve says "do this again eleven times and nothing goes wrong". The example shows what one wrong month costs: the stock ends 10% under the strike, and that single trade gives back four of these premiums. Two bad months in a year and the yearly figure is gone. This is the whole reason the wheel strategy is taught as a loop with rules about which stock and what size, not as a yield to collect.
Compare trades with it — don't plan around it
The period yield is useful for one thing: comparing two strikes or two expiries on the same stock in the same units. A bigger premium on a lower-quality stock usually just means the market expects a bigger move. Time matters too — most of a premium's value melts in the last weeks, which is why many sellers pick 30 to 45 days (see theta decay, explained). Use the number to pick between trades. Never use it to decide how much to put in.
The Options Wheel System · $99 · one payment
Learn the whole wheel, in order — then use it for life.
22 plain-English modules from complete beginner to running the wheel: covered calls, cash-secured puts, assignment, rolling, the math and the risk rules — with a scored quiz after every part and a daily deals board that applies the same rules to real markets.
See What’s Inside the Course One payment · Lifetime access · Education only, not adviceNot sure the wheel is for you?
Take the 2-minute trader test Try everything free first — the whole library costs nothing. · Try our free TradingView indicators (they work in the TradingView phone app)One chart idea a day, in plain English. Follow along: